Remember how the millennials were all moving to the city, eschewing automobiles and prompting apartment growth?
Well, that generation – born in the 1980s and early 1990s – is growing up, and now they’re headed to the suburbs. And not just any suburbs, either – they’re looking for suburbs that offer a high quality of life and a low cost of living, be it in their own city or one that is on the other side of the continent.
So says “Emerging Trends in Real Estate,” an information-packed report that was recently published by the Urban Land Institute and the accounting firm PwC. The extensive report was created from real estate data, dozens of focus group meetings around the country, and exhaustive surveys from 1,600 top real estate professionals. It covers the gamut of real estate hopes and fears – from the chances that the dizzying growth in some markets is slowing, to the demographic changes that are shaping real estate construction and purchasing.
The ULI introduced the report Nov. 13 at a breakfast in downtown Boise that included a panel discussion with local real estate leaders.
Among the findings: Generation X, the group that followed the Baby Boomers, was expected to retire early and head for warmer climes. Instead, they’re staying where they are, or moving to be closer to their children. They’re still recovering from the Great Recession, and a lot of them are renting. As one of this generation, I can say that retirement seems a long way off.
Then there’s Generation Z, the group that was born in 1995 and later. The oldest Gen Z-ers are now entering the workforce. ULI’s keynote speaker Nov. 13 was Anita Kramer, vice president of the ULI Center for Capital Markets and Real Estate. She said that Gen Z has a less-than-relaxed outlook.
“They have never known a low-stress environment,” Kramer said. “They had 9/11, the Great Recession, income equality, and political polarization, so they are pragmatic, cautious and oriented toward personal security.”
According to early focus group and survey observations on Gen Z, Kramer said, this group seems to like urban centers, and doesn’t appear to share the millennials’ job-hopping or contracting ways. They’re expected to prioritize mentoring; hands-on management instead of working remotely; and salary and benefits over making a difference in society.
As for the Baby Boomers, Kramer said more than a quarter of them say now that they want to keep working after the age of 70. By the year 2024, nearly a third of the population ages 65 to 74 is expected to be in the workforce.
The Baby Boomers are still moving around, choosing to live near their kids or in other preferred locations, and requiring a spectrum of housing choices. When they start turning 80, some will be seeking housing such as assisted living, nursing homes, and memory care, Kramer said – “senior housing in all its forms.”
The ULI report covers much, much more than demographics. Another big topic: the fact that nationally, the housing supply isn’t keeping up with demand. The shortage is driving up housing prices in some markets – notably, in Boise – but those rising prices haven’t led to the logical market correction. There’s still a shortage. This is well illustrated in Boise, where housing prices have increased 60 percent since 2000 but new housing units have only increased 30 percent.
One reason is labor, Kramer said. It’s well known there’s a critical shortage of construction workers. For the 25 years she’s been working in real estate, Kramer said, she’s heard technology was evolving to address labor shortages with automation.
“Now, it’s finally happening,” she said. “It won’t be one technology; it will be a combination of many, including new construction techniques, including steel-frame technology; 3D printing; better construction management processes; drones, and sensors that can track progress.”
So much of what we’re seeing in Boise is happening in other markets. But not all of it. Boise really is showing unusually high migration and economic growth. The Treasure Valley’s seven-year stretch of expansion has many people asking when the inevitable economic correction will happen in real estate.
Based on surveys and data, Kramer said about 80 percent of real estate professionals nationally expect 2018 to be an excellent year for them.
“We are in a long cycle, not in a boom/bust,” she said. “After spending most of the last couple of years focused on what could derail expansion, the market is looking for the best way to ride out what could be a longer path.
“We’re cruising at altitude.”
Anne Wallace Allen is editor of the Idaho Business Review.